By Abachi Ungbo
Restructuring has been loudly touted as a panacea to the many ills plaguing Nigeria. In light of this, opponents of the current system of government have described it as an aberration and must be changed to reflect the federalism that we profess. And, they have managed to stir up the conversation on the controversial issue with different ideas on what form it should take.
The hubbub of the value added tax (VAT) is the latest subject to accentuate our many flaws. Many daggers have been plunged into the heart of our national unity since the judgment was pronounced. Indeed, the unintended consequence has been to pit Nigerians against themselves.
So many states do not know what to do with the decision. I think many are biding their time to weigh what just hit them or, more appropriately, are waiting for the outcome of the court challenge. As Lagos has rushed down the River State path to prepare for VAT receipt, a domino effect is expected to follow.
VAT receipts are too attractive to stand still. The total collected in 2020 was around 1.5 trillion naira. In the first quarter of 2021, it was 496.39 billion naira while it rose to 512.25 billion naira in the second quarter.
Indeed, the big contributors to the VAT savor the victory in a sweet celebration. The rationality of depriving them of the enormous VAT receipts collected in their field is beyond them; after all, it’s location specific. The idea of the strong supporting the weak rings hollow for them. They need income to run their states, the scales have fallen from their eyes.
We can decide what model or what nature of our fiscal federalism should be adopted as a freedom from the appendages of the center, but the “free” have a way of keeping you in slavery, especially when you are not. not aware of your power to provide for yourself. The states did not exercise their power within a federal framework instead, they chose to simply converge in the capital with their baskets.
To prevent a financial apocalypse that will envelop the “weaker states” amid the current precarious financial situation, the proposal put forward by the Lagos Chambers of Commerce and Industry (LCCI) using population factors of 30%, 20% equality and 50% derivation against the dominant formula of 30% population, 50% equality and 20% derivation must be seriously considered in the distribution of VAT revenue for states and LGA
Granted, we are not fairly endowed, but being unimaginative in financial independence is the major problem that the current awakening would help solve.
Sadly, northern Nigeria has come under criticism for being the acclaimed primary recipient of the VAT garnered, mostly from the south. However, convincing arguments from analysts abound to make this claim laugh.
For Lagos, it enjoys the unique advantage of being home to the country’s formal economy. Essentially, host large companies with branches scattered across the country that issue VAT receipts through their head office. Imagine the blow the state will take if each state starts collecting its VAT. Remember that agriculture, an area of comparative advantage, is not taxed for food security reasons.
However, the spectacle of the destruction of alcoholic beverages in some “Puritan States” that are taxed and receipts pushed into the VAT pool for further distribution needs to be resolved. This irritates a lot of Nigerians.
The North has no reason with its size and potential to remain as tied to the stock market in the center as their counterparts. It is sad that it finds itself at the bottom of the scale of all socio-economic indicators with little effective effort to cross the threshold.
Angling for political ascendancy has only allowed a full greedy hand while others are left behind. The dynamics of human development and the construction of the region’s economic backbone are in complete limbo.
To gain cheap popularity, leaders divert their ineptitude by simply attacking anything perceived to be anti-North, and they often display reactionary attitudes. Then, the great stirs up religious or ethnic feelings. The North is a metaphor for how diversity has been wasted in the country.
Imagine hemorrhaging the productive population and businesses from being a notorious powder keg, leaving it a graveyard of once thriving industries.
The ability of Kaduna state to build an IGR larger than that of Kano, known to be the trade center of the north and home to a huge population, further dramatizes the weakness and depth of the leadership.
I think Nigeria is on the cusp of major changes. It is a good time to be creative in generating wealth. The region must work to support businesses, respect diversity, work for peace and improve IGR, an area of comparative advantage and the quality of leadership.
Ungbo writes from Kaduna via